Daily Archives: April 2, 2022

President-elect Vladimir Putin ahead of being sworn-in as President of Russia at St Andrew's Hall of the Moscow Kremlin.

Mikhail Metzel | TASS via Getty Images

Russia's Kremlin has rebuffed claims made by the U.S. that President Vladimir Putin felt he was "misled" by his military commanders over Moscow's invasion of Ukraine.

"To our regret and even concern neither the Department of State nor the Pentagon have authentic information about what is happening in the Kremlin," Putin's spokesman, Dmitry Peskov, told reporters at a briefing Thursday.

"They just do not understand what is happening in the Kremlin, they do not understand Russian President Vladimir Putin, they do not understand the mechanism of decision-making and they do not understand the style of our work," Peskov added, according to state news agency Tass.

"This is not just regrettable. It causes our concern, because such utter misunderstanding results in wrong decisions, in careless decisions that have very bad consequences."

The comments came after a declassified U.S. intelligence assessment released Wednesdaysuggested Putin had not been given the whole truth about Russia's invasion of Ukraine.

Statements by U.S. Secretary of State Antony Blinken and White House communications director Kate Bedingfield on Wednesday included comments that Putin "felt misled by the Russian military" and that this had resulted in "persistent tension between Putin and his military leadership."

Putin is thought to have expected Russian forces to be able to occupy Ukraine with some ease, with the aim of unseating the Ukrainian government and installing a pro-Russian regime as Moscow looks to expand its sphere of influence over former Soviet states.

However, Russian forces have faced staunch resistance from both Ukrainian forces and thousands of volunteer civilian fighters across the country.

To date, Russia has only captured one city, Kherson, while a much-feared assault on the capital of Kyiv has yet to begin, the second-largest city Kharkiv continues to resist and the western city of Lviv remains relatively unscathed.

Defense analysts have said that Russian troops were ill-prepared for the invasion, but this may not have been communicated to Putin by military commanders eager to please and reluctant to look incompetent.

Analysts told CNBC on Thursday that Putin's inner circle are either too loyal, or too scared, to question the strongman leader. As a result, despite the unpopular war, no one is likely to challenge his leadership or instigate a coup against Putin.

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Russia hits back at U.S. intelligence claims that Putin was 'misled' over Ukraine war - CNBC

It has now been 37 days since Vladimir Putins forces reportedly thought they could capture Kyiv within 48 to 72 hours. Many news reports describe the Russian invasion as stalled, but as I read the detailed analyses, that isnt quite right: Ukrainian forces are counterattacking, and in many places Russia appears to be losing ground.

One thing Russia has managed to defend quite effectively, however, is the value of its currency. The ruble plunged in the days after the Ukraine invasion, but it has since recovered almost all of its losses:

How did that happen, and what does it mean?

One thing worth noting is that Russias economic officials appear to be more competent than its generals. Elvira Nabiullina, the governor of Russias central bank a role equivalent to that of Jerome Powell at the Federal Reserve is especially well regarded by her peers abroad. Nabiullina reportedly tried to resign after the invasion started, but Putin wouldnt let her leave.

Unwilling as she may have been to stay in her job, Nabiullina and her colleagues pulled out all the stops to defend the ruble. They raised the key interest rate more or less equivalent to the federal funds rate in the United States from 9.5 to 20 percent, to induce people to keep their funds in Russia. They also imposed extensive controls to prevent capital flight: Russians have faced restrictions on moving their money into their foreign bank accounts, and foreign investors have been prohibited from exiting Russian stocks, and more.

But theres a mystery here. No, its not puzzling to see the ruble recover given such drastic measures. The question is why Russia is willing to defend its currency at the expense of all other goals. After all, the draconian measures taken to stabilize the ruble will probably deepen what is already looking like a depression-level slump in Russias real economy, brought on by surprisingly wide and effective sanctions imposed by the free world (I think we can resurrect that term, dont you?), in response to its military aggression.

Lets take a brief excursion into economic theory here. One of the classic propositions in international economics is known as the impossible trinity. The idea is that there are three things a country might want from its currency. It might want stability in the currencys value in terms of other currencies for example, a stable value of the ruble in dollars or euros to create greater certainty for businesses. It might want free movement of funds across its borders, again to facilitate business. And it might want to retain freedom of monetary action the ability to cut interest rates to fight recessions or raise them to fight inflation.

The impossible trinity says that you cant have it all, that you have to choose two out of three. You can, like Britain, have open capital markets and independent monetary policy, but that means allowing the value of the pound to fluctuate. You can, like countries that have adopted the euro, have free movement of capital and currency stability, but only by giving up monetary independence. Or you can, like China, have a stable currency and your own monetary policy, but only by maintaining capital controls. (Those controls, by the way, are one main reason the renminbi isnt going to rival the dollar as a global currency for the foreseeable future.)

So whats puzzling about Russia? Normally a country can choose two out of three legs of the trinity; Russia has decided to take only one. It has imposed severe capital controls, but it has also sacrificed monetary independence, drastically raising interest rates in the face of a looming recession.

In effect, Russia is taking a belt-and-suspenders (not to be confused with Belt and Road) approach to defending the ruble, and this has seemingly taken priority over all other economic goals. Why?

Let me offer a speculation, with the clear proviso that its only a speculation, not based on any direct evidence. My guess is that the value of the ruble has become a crucial target not so much because its all important but because its so clearly visible.

Suppose that, as seems highly likely, Russia sees a huge surge in inflation and a plunge in gross domestic product in the months ahead. Will Putins government admit that these bad things are happening? Quite possibly not. Authoritarian regimes often try to suppress unfavorable economic data. Recently, for example, Turkeys president, Recep Tayyip Erdogan, responded to reports of high inflation by sacking the head of his nations statistical agency.

Some years ago researchers at M.I.T. created the Billion Prices Project using online price data to specifically track the consistent understatement of inflation by Argentinas government at the time. The same approach also turned out to be very useful in the United States for the opposite reason as a way to refute claims by right-wing inflation truthers that the Obama administration was cooking the books (it wasnt).

If Russias economy deteriorates as badly as most expect in the near future, it seems all too likely that the nations muzzled media will simply deny that anything bad is happening. One thing they couldnt deny, however, would be a drastically depreciated ruble. So defending the ruble, never mind the real economy, makes sense as a propaganda strategy.

A further thought: Among the people who might not be aware of deteriorating Russian economic conditions, as long as the ruble holds its value, might be Vladimir Putin himself. U.S. intelligence claims that Putins military advisers have been afraid to tell him how badly the war is going. Is there any reason to believe that his economic advisers will be any more courageous?

So Russias defense of the ruble, while impressive, isnt a sign that the Putin regime is handling economic policy well. It reflects, instead, an odd choice of priorities, and may actually be a further sign of Russias policy dysfunction.

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Opinion | Why Russia Is Defending the Ruble - The New York Times

The scenes of German and Soviet soldiers overtaking Ukraine in Sergei Loznitsas Babi Yar: Context inevitably bring to mind the current Russian invasion of the country. For more than two decades, Loznitsa, a Ukrainian filmmaker who was raised in the Soviet Union, has chronicled the past and the present in Ukraine and Russia by revisiting historic events and depicting daily life in the grips of war and empire.

Babi Yar: Context, a documentary that opens on Friday at Film Forum, recreates Ukraine during World War II through vivid archival footage of Kyiv, where Nazis murdered thousands of Jews at a single site, the ravine of the films title. In the fictional satire Donbass, which opens on April 8, Loznitsa re-enacts bizarre and disturbing episodes from Russian incursions into eastern Ukraine in the 2010s.

Loznitsa, 57, recently made news when he quit the European Film Academy over a statement by the group on the Russian invasion that he deemed toothless; then he returned to the headlines after he was ejected from the Ukrainian Film Academy for opposing boycotts of Russian filmmakers. Even Ukraines president, Volodymyr Zelensky, weighed in during a March 27 interview with Russian journalists, saying of Loznitsa, Hes an artist who supports Ukraine.

Loznitsa regards the conflict as a European war, not just a Ukrainian war. Speaking in Russian, with his producing partner Maria Choustova-Baker serving as an interpreter, he spoke about his films and current events during a video chat from Berlin, where he lives. These are excerpts from our conversation.

Where were you when the Russian invasion started?

Vilnius. I am finishing a new film there. I was awoken by an SMS from my friend, Russian filmmaker Victor Kossakovsky. It said, Forgive me. What a nightmare.

Is it true that you helped your parents get out of Ukraine?

In contrast to many others, I actually believed in what the U.S. intelligence was reporting and what President Biden was telling the world [that Russia had planned to invade]. I even guessed the dates correctly. My friend, the Ukrainian co-producer Serge Lavrenyuk, helped me remove my parents [from Kyiv, three days before the invasion started]. This war comes as an enormous shock for millions of people. My father was born in 1939, and he remembers very well his childhood and these horrors. My mother was born in 1940 and also remembers all the movement during the war. Now they are [in their 80s] and it is the same circumstances!

How would you compare the situation now with the history in Babi Yar: Context?

The fundamental difference is that back then, it was a fight between two totalitarian regimes. Now there is one totalitarian regime fighting with a country aspiring to be independent. Back then, the big countries like the U.S. and the U.K. also participated in the war. But today, the majority of the countries who have the potential to stop this war have chosen this immoral position of an onlooker, of noninterference. And the politicians of these countries have put their citizens in this situation of immorality, because the only choice the citizens have is to observe online, in real time, how city after city of Ukraine is destroyed.

You could say that Putin is winning at the moment internationally, because the policies of world leaders are based on fear. Theyre not even capable of taking a rather neutral step of introducing a no-fly zone over Ukraine.

Some worry that such involvement would lead to escalation and nuclear conflict.

I dont think its a valid excuse. First of all, do these politicians have any guarantee that in case God forbid Russia does manage to swallow Ukraine, they wont use nuclear weapons? Putin had no valid reason for invading Ukraine. So why do you think he would need a valid reason to use nuclear weapons? This can only be stopped by force. Sooner or later, NATO will have to get involved, and the longer they wait, the bloodier the resolution of the conflict would be.

Babi Yar: Context doesnt shy from addressing the role of people within Ukraine in the massacre of Jews. Have you experienced any criticism about this?

There were people who criticized me in Ukraine for making this film the way I made it. The contemporary situation is completely different. And its absolutely obvious that all that Putin is talking about, that there are Nazis in Ukraine, was all nonsense. At the same time this question of collaboration in history is very, very painful in Ukraine. Yes, I was heavily criticized.

Do you have relatives that were affected by the Babi Yar killings?

[Nods]

In Donbass you take a different approach: dramatizing events based on actual cellphone videos. Why this form?

First, because I was mesmerized by those amateur videos that I found on the internet. Second, I wanted to create this grotesque form because I needed something to keep the film together and I didnt want to use just one protagonist or a group of protagonists. I wanted you to observe the idiocy in all its shapes and forms. This wonderful film by Luis Buuel, The Phantom of Liberty, also employs this method.

One of the scenes shows Russians moving artillery around from place to place after firing on a civilian bus.

Yes, the most important thing for them was not to be identified. So this is why they had to move from one place to the other. And the killing that occurs afterward [in the film] is because they wanted to get rid of the witnesses.

That sounds like a mafia movie.

Yes, in fact, these criminal gangs that took power in 1917 and that hold power today, theres no difference between them and any other mafia. Before this, the mafia covered itself up with Soviet ideology. Nowadays there is no ideology anymore. Its just mafia.

Donbass also portrays people who are hired to pretend to be witnesses to a staged explosion.

Yes, it happens all the time. This is the technique thats routinely employed by Russian television, and monitoring groups managed to identify actors who play the parts of witnesses in different locations. So they have almost a cast of actors that they employ for fabrication of fake news. There was a notorious TV report around 2014: a story of how Ukrainians crucify a Russian boy. This report was analyzed by professionals who proved that every single element was fake, all staged.

When you were growing up in the Soviet Union, was there a point where you became disillusioned?

The fact is that the entire Soviet Union lived in this kind of double reality or multiple realities, and everybody was aware of it, but very few people actually questioned it. But I was a very bad pupil. [Laughs] I was a very good pupil in terms of school results, but I always questioned this double reality and asked myself, Where am I and what is going on?

Today this criminal group [in power in Russia] has regrouped. They fixed the countrys economy a little bit. They upgraded their military force. And now theyre ready to conquer the world again. [Laughs]

These days your movies can look like prophecies because of their familiar images of war.

The problems that I talk about in my films have been around for a long time. This is why I wanted to make Mr. Landsbergis [a new film about Lithuanias successful bid for independence from the Soviet Union in 1989-91]. Because there is this unique and fantastic and colossal experience of fighting against the Soviet Union and winning.

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Russia and Ukraine Have Long Been This Filmmakers Subject - The New York Times

Energoatom, Ukraine's state power company, has warned that Russian soldiers likely received high radiation doses at Chernobyl. Here, an abandoned railway is seen in the Chernobyl zone close to the Ukraine-Belarus border, weeks before the Russian invasion. Chris McGrath/Getty Images hide caption

Energoatom, Ukraine's state power company, has warned that Russian soldiers likely received high radiation doses at Chernobyl. Here, an abandoned railway is seen in the Chernobyl zone close to the Ukraine-Belarus border, weeks before the Russian invasion.

Russia's force has fully withdrawn from the area of the Chernobyl nuclear power plant, Ukraine's defense ministry confirmed on Friday. It cited two reasons for the exit: military losses and radiation exposure.

"Russian mutants lost this round of @stalker_thegame," the ministry said via Twitter, referring to the Stalker video game franchise that is set in the notoriously radioactive zone.

When they left, Ukraine's ministry added, the Russian troops looted the power plant, taking "kettles, lab equipment, and radiation." They also took the captured Ukrainian national guard members who had been at the facility when Russia invaded in late February.

In an update on conditions at the Chernobyl plant, Energoatom, Ukraine's state power company, said on Friday that all control and monitoring systems were operating normally, despite the removal of several containers and spare parts. Ukrainian workers who remained at the plant throughout the occupation to monitor it had remained safe from radiation, it added.

The International Atomic Energy Agency said on Thursday that it's still working to determine the veracity of reports that Russian soldiers received high doses of radiation in the notoriously contaminated Chernobyl Exclusion Zone during more than a month of occupation.

Energoatom has said Russian troops left the site after digging trenches and building fortifications in the Red Forest an area it says is the most heavily polluted in the entire zone. Without providing details, the company said a panic broke out when the first signs of radiation sickness emerged. On Friday, the company reiterated that the greatest threat to the occupiers was likely posed by inhaling radioactive dust disturbed by their actions.

The IAEA said Russian forces had sent two buses of troops out of the area to Belarus as they returned control of the Chernobyl site to Ukraine. A third bus also left a nearby city where many of the Chernobyl staff members live, it said.

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Russian troops were likely exposed to radiation at Chernobyl - NPR

Sources

Scott Boston, senior defense analyst at RAND Corporation, focusing on land warfare and the Russian military

Nick Reynolds, research analyst specializing in land warfare at the Royal United Services Institute (RUSI)

Michael Kofman, director of Russian studies at CNA, a research organization

Peter R. Mansoor, a military historian who helped edit a U.S. counterinsurgency manual

Anthony King, the author of a book about urban warfare and a professor at the University of Warwick

Cliff Rogers, professor of history at the United States Military Academy at West Point

Liam Collins, a retired colonel in the Special Forces of the United States Army, who served as executive officer to the senior U.S. defense adviser to Ukraine from 2016 to 2018 and earned a doctorate from Princetons School of Public and International Affairs

Russian control areas are from the Institute for the Study of War and the American Enterprise Institutes Critical Threats Project, as of March 30. Building data is from East View Geospatial and OpenStreetMap.

Hostomel Airfield footage from Feb. 24 by the Ministry of Internal Affairs of Ukraine

Peremohy Avenue video from @kseniya_shalenko via Storyful

Flooding satellite image from Maxar Technologies

Brovary tank battle from Azov via Associated Press

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How Kyiv Has Withstood Russia's Attacks - The New York Times

For years, Oksana Baulina did her best to stand up to Vladimir Putins system in Russia, and was eventually forced to flee the country. Last week, she was killed by a Russian missile, soon after arriving in Kyiv to report on Vladimir Putins invasion.

The death of Baulina, a former associate of opposition politician Alexei Navalny who was working for the Russian news outlet The Insider, has put the spotlight on the tiny group of independent Russian journalists now inside Ukraine.

In their work, they are attempting to break through the Kremlins stranglehold on information about events in the country, which official Russian media insists on calling a special operation to liberate Ukraine from Nazis.

Colleagues paid tribute to Baulina as a passionate and fierce reporter, who had given up a life working in glossy magazines to stand up for what she believed in.

I met her a few days before her death, I was probably the only person from her previous life that she met here, and she was explaining in great detail her plans, she was just so enthusiastic and really wanting to do the reporting, said Peter Verzilov, an activist and journalist who is the publisher of news site Mediazona, in an interview in Lviv.

Mediazona, like many Russian-language news outlets, was blocked by the Russian internet watchdog in the early days of the war for not adhering to wartime censorship rules that ban any information that could discredit Russias army.

Despite the block, during the last month our readership numbers went up almost twice, to about 3.5 million unique visitors this month, said Verzilov.

Nevertheless, Verzilov said it was clear that Russian state messaging was working on a large number of Russians, pointing to the numerous stories of Ukrainians contacting friends or relatives in Russia and being told they were imagining the things they could see with their own eyes.

When your own son is telling you, Dad, do not believe the fucking television, its not true, and you say No, no, Nazis are just brainwashing you, it does show that Russian propaganda is amazingly effective for certain portions of the population. It really does work, when youre switching between channels and all of them have the same content, said Verzilov.

Other journalists agreed that cutting through the state-sponsored noise was getting ever harder. Last weekend, Ukrainian president Volodymyr Zelenskiy gave an interview to several independent Russian outlets, and Russian authorities immediately announced any site that published it could face criminal responsibility.

The people who say, theres plenty of information on the internet, they just dont understand what theyre talking about. My twin sister asked me how to watch Zelenskiy, she just had no idea how to find it, said Yevgenia Albats, a veteran Russian journalist who edits the New Times website.

Albats said 741 websites have been shut down in Russia since the beginning of the war, and said the effect was hard to overstate. The New Times was blocked on the second day of the war. Albats is still updating the website using a VPN, though four of her employees have left the country.

Basically, its a total evaporation of any alternative news or opinions in the Russian language media sphere. Total destruction. Annihilation of any alternative views and opinions.

A singular exception has been the reporting filed from Ukraine by Elena Kostyuchenko, a resourceful and fearless reporter for Russias Novaya Gazeta, whose editor-in-chief Dmitry Muratov won the Nobel prize last year.

Kostyuchenko was initially turned away from the border when she tried to cross from Poland on the first day of the war, but was let in after the editorial board made some phone calls. Since then, she has been in southern Ukraine. She has filed moving reports from Mykolaiv, which has been under intense Russian attack, and Kherson, currently occupied by Russian troops.

Every day, I see the crimes my country is committing. Every day I see injured people, dead people, destroyed houses, I spoke in Kherson with people who lived through kidnappings, she said, in a telephone interview from Mykolaiv.

Its morally difficult, but I think it would have been morally more difficult to sit in Moscow and follow it on internet, she said.

Once inside Ukraine, Kostyuchenko said she did not have problems working with a Russian passport, once she had explained she was from Novaya Gazeta.

The majority of people understand why Im here, support what Im doing and support me hugely, she said.

Novaya Gazeta took the decision to follow Russian censorship laws, not using the word war or occupation but instead leaving blank spaces where the forbidden sections would go.

Kostyuchenko said she wrote her texts without censorship and they were then redacted by editors in consultations with lawyers.

If the law was formulated to only put journalists in prison, inside the office we would publish everything, but the law is formulated so all the people associated with the text: proofreaders, internet managers and the accountants, could be responsible, said Kostyuchenko.

We had a meeting inside the editorial board. We had two options: close or to continue working in the regime of military censorship. More than 90% of readers voted for us to keep on working, she said.

This did not save the publication, however, and earlier this week Muratov announced that Novaya would be closing until the end of the special operation in Ukraine.

Many independent journalists have left Russia altogether, in fear of being jailed under the new laws. Albats said she had no plans to leave Moscow, but was crying every day over what had become of Russia, and the fact her country was waging a war of conquest.

We are destroying another country and killing people. And this is unbearable. I understand that what Im doing is basically almost useless. I do this because otherwise Im going to hang myself, she said.

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Russian reporters in Ukraine: Every day I see dead and injured - The Guardian

In her co-authored 2018 book Political Risk, former U.S. Secretary of State Condoleezza Rice tells the story of an hourlong negotiation with Russian President Vladimir Putin. For what were clearly protectionist reasons, Russia had banned U.S. pork products. To justify the ban, Putin claimed American pork posed an unacceptable risk of the parasitic disease trichinosis because Russians tended to cook their pork less. You wouldnt believe it, Rice recalled. We spent an hour, an entire hour, on pork. And we had this long discussion of cooking habits in Russia compared to Alabama, where Im from.

In the three decades since the end of the Cold War, the world was mostly stable enough to allow leaders to concentrate on pursuing and preserving economic opportunitiesnot only for pork producers but for all kinds of companies, small and large. The U.S.-Japan trade disputes of the early 1990s, which were mostly about Japans reluctance to buy more U.S.-made cars, beef, rice, and semiconductors, were a top priority for U.S. President Bill Clinton. So was the conclusion of the North American Free Trade Agreement with Mexico and Canada, which was driven largely by corporations seeking lower wage costs. For decades, Berlin encouraged German companies to look the other way at Russias increasingly aggressive actions in Chechnya, Georgia, Ukraine, and elsewhere; Germany is now Russias largest trading partner after China. World leaders made the annual trek to Davos, Switzerland, for the World Economic Forum to discuss the future of a global economy that was highly integrated and seemed to be getting more so each year. Efficiency and seamless trade were top of mind for the worlds government and corporate decision-makers.

Russias brutal invasion of Ukraine five weeks ago, and the punishing Western economic sanctions that have followed, did not on its own smash this complacency. The U.S.-China trade war launched by former U.S. President Donald Trump had already caused some companies to rediscover geopolitical risk and reconsider their exposure in China. The business lockdowns and travel restrictions triggered by the COVID-19 pandemic left companies around the world scrambling to find reliable suppliers. Right now, more disruptions of the global economy look likely as Shanghai and other parts of China lock down yet again to control the virus.

In her co-authored 2018 book Political Risk, former U.S. Secretary of State Condoleezza Rice tells the story of an hourlong negotiation with Russian President Vladimir Putin. For what were clearly protectionist reasons, Russia had banned U.S. pork products. To justify the ban, Putin claimed American pork posed an unacceptable risk of the parasitic disease trichinosis because Russians tended to cook their pork less. You wouldnt believe it, Rice recalled. We spent an hour, an entire hour, on pork. And we had this long discussion of cooking habits in Russia compared to Alabama, where Im from.

In the three decades since the end of the Cold War, the world was mostly stable enough to allow leaders to concentrate on pursuing and preserving economic opportunitiesnot only for pork producers but for all kinds of companies, small and large. The U.S.-Japan trade disputes of the early 1990s, which were mostly about Japans reluctance to buy more U.S.-made cars, beef, rice, and semiconductors, were a top priority for U.S. President Bill Clinton. So was the conclusion of the North American Free Trade Agreement with Mexico and Canada, which was driven largely by corporations seeking lower wage costs. For decades, Berlin encouraged German companies to look the other way at Russias increasingly aggressive actions in Chechnya, Georgia, Ukraine, and elsewhere; Germany is now Russias largest trading partner after China. World leaders made the annual trek to Davos, Switzerland, for the World Economic Forum to discuss the future of a global economy that was highly integrated and seemed to be getting more so each year. Efficiency and seamless trade were top of mind for the worlds government and corporate decision-makers.

Russias brutal invasion of Ukraine five weeks ago, and the punishing Western economic sanctions that have followed, did not on its own smash this complacency. The U.S.-China trade war launched by former U.S. President Donald Trump had already caused some companies to rediscover geopolitical risk and reconsider their exposure in China. The business lockdowns and travel restrictions triggered by the COVID-19 pandemic left companies around the world scrambling to find reliable suppliers. Right now, more disruptions of the global economy look likely as Shanghai and other parts of China lock down yet again to control the virus.

But the losses triggered by the war in Ukraineand the speed at which theyve been incurredare unprecedented. The British energy giant BP, the biggest foreign investor in Russia, is taking a $25 billion write-down and losing a third of its oil and gas production after divesting its share in the Russian oil company Rosneft. European aircraft leasing companies could lose up to $5 billion worth of aircraft trapped in Russia by sanctions. The French automaker Renault has lost 30 percent of its market value as it unwinds its Russia-based production. Nearly 400 large foreign companies have pulled out of Russia entirely or suspended their operations, compared with fewer than 40 continuing business as usual.

The result is shaping up to be a great risk recalculation. After decades in which issues such as pork protectionism could be deemed a problem serious enough to engage a U.S. secretary of state, the possibility of truly catastrophic economic losses suddenly looms large. Were China, for example, to attempt an invasion of Taiwan, the costs would dwarf those faced by companies over Russias war in Ukraine. Investors are paying attention. Already, foreign owners of Chinese stocks and bonds are fleeing the market; the Institute of International Finance (IIF) has described this divestment as unprecedented in scale and intensity, far exceeding outflows from other emerging markets. While the institutes chief economist, Robin Brooks, cautioned that it was too soon to draw definitive conclusions, he and others wrote in a recent IIF report that the timing of outflowswhich built after Russias invasion of Ukrainesuggests foreign investors may be looking at China in a new light.

What are the implications of companies and investors massively recalculating risk? Recent research from U.S. Federal Reserve and other economists suggests there will be both short- and long-term costs. Looking back over a century, economists Dario Caldara and Matteo Iacoviello conclude that big geopolitical risk events such as wars and terrorist attacks usually result in economic slowdowns, lower stock market returns, and flows of capital away from emerging markets toward advanced economies perceived as more stable. Research from Vivek Astvansh and his colleagues suggests more lasting consequences as well. Using data going back to 1985, they find that rising geopolitical risk slows innovation as companies find the future more uncertain and become wary of spending funds on promising new technologies. These negative effects can linger for years even if the disruptions pass.

Such a recalculation of risk will be costlybut it was long overdue. Way back in 2005, when the cheerleaders of modern globalization were still full-throated, Barry Lynnnow executive director at the Open Markets Institutewarned that corporations have built the most efficient system of production the world has ever seen, perfectly calibrated to a world in which nothing bad ever happens. The global economy, he argued presciently, was enormously vulnerable to disruptions of all sorts, from wars and terrorism to earthquakes and pandemics. In search of efficiencies, multinational companies had blithely ignored such risks for decades.

If governments and companies learn the proper lessons, their responses could be beneficial, even if they come at high initial cost. Companies will shorten their supply chains and emphasize resilience, not just efficiency. Democratic and free-market-minded governments, such as those in the United States and much of Europe, are reassessing their dependence on authoritarian states for critical technologies and commodities. The U.S. government began this effort in a serious way in 2019, when the Trump administration ordered U.S. companies to stop using telecommunications infrastructure from the Chinese technology company Huawei and pressed its allies to do the same. Germany and other European nations face a longer road in weaning themselves off Russian oil and gas but are moving quickly to find new suppliers.

The danger is that governments and companies will overcorrect by exaggerating the new risks in the same way they previously ignored them. Looming threats, in particular, could be even more disruptive than actual events, such as wars. Facing massive uncertainty, companies and investors pull back, whereas following an adverse event, they become more confident at pricing in such risk. As deep as the economic disruptions from Russias war look right now, companies can adjust once the sanctions regime is clear and policies to replace Russian energy are in place. But the mere fear over an intensified confrontation with China could lead to a generalized, disastrous stampede. It is easy to go from underestimating political risk to fearing it too much. Such an overcorrection could, for example, discourage Western companies from expanding in developing countries, where they are urgently needed to prevent economic contractions, help develop economies, and provide an alternative to Chinas strategic Belt and Road Initiative.

It is hard to imagine the day when a U.S. secretary of state will again spend an hour with Russias president talking about pork. Nor should we hope for it. The geopolitical stability of the past three decades produced too much magical thinking by governments and companies alike. The global economy is still highly integratedbut also prone to great disruptions. A sober calculation of risks and rewards is just what is needed now.

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Russia's War Is the End of Magical Thinking - Foreign Policy

On March 25, the Russian Ministry of Defence announced that the first phase of the invasion of Ukraine was over. A mere month earlier, President Vladimir Putin had vowed to completely destroy Ukraines military capabilities and to replace the Ukrainian government, which he claimed without any evidence was a neo-Nazi junta planning to commit genocide in Donbas.

To that end, on February 24 the Russian army and airborne forces attempted a lightning assault on Kyiv, and simultaneously launched offensives against Kharkiv, Sumy, Chernihiv, Kherson, Melitopol, Mariupol and on the line of contact in the Donbas region. The subsequent month of unexpectedly vicious high-intensity combat has seen Russian forces fail to take all the cities, with the exception of the smaller southern cities of Kherson and Melitopol, which fell in the first days. In return, the Russian army has taken extremely heavy losses; between 7,000 and 15,000 personnel killed and more than 2,000 vehicles visually confirmed as destroyed or captured.

The new announcement by the Russian government is a direct response to these failures. It is an admission that, at least for now, Russia cannot return Ukraine to its control by force. Instead of regime change (denazification according to Russia), the new claim is that Russias goal is a more limited focus on taking territory and destroying Ukrainian forces in the Donbas.

This is a serious crisis for President Putins regime. To justify the special military operation against Ukraine, he has used extreme rhetoric and baseless claims of neo-Nazism and genocide in Ukraine for months. Since the invasion began, ordinary Russians have been presented with a barrage of Z-themed pro-war propaganda, patriotic speeches and rallies designed to stir patriotic fervour.

During the first few days, when Russian leaders still assumed they would quickly defeat Ukraine, Russian state media carried pronouncements that President Putins invasion had reshaped the world order and put an end to both the Ukraine question and a unipolar United States-led, NATO dominated world. Perhaps even more importantly, Russias military power and history both conventional and nuclear are a cornerstone of national identity and national pride, and Russians have long looked down culturally and politically on Ukraine and Ukrainians. All of this makes the current situation extremely difficult for the Russian government to explain to its people.

In the information climate carefully created by the Russian government for its people, how could the mighty Russian military have failed to destroy the much weaker Ukrainian army? How can a supposedly high-tech special military operation that would be conducted in a short time by elite forces have led to tens of thousands of dead, wounded and captured Russian troops and more than 2,000 destroyed Russian vehicles? How is it that the Ukrainian people supposedly being oppressed by an unpopular neo-Nazi junta imposed by shadowy hostile Western forces are now fighting with fierce anger and almost total national unity against their Russian liberators? Most of all, how can the Russian government supposedly a nuclear superpower, and the self-proclaimed heir of the victory over Nazi Germany in 1945 make a ceasefire deal that leaves the supposedly genocidal, neo-Nazi Ukrainian government in power? By creating a narrative justification for the invasion that was completely divorced from reality, the Russian government has created a situation where almost any possible outcome to the war now will be extremely hard to justify to its own people.

Russia needs a ceasefire soon, however, because the current rate of equipment and personnel losses is not sustainable, and in any case, they are making little meaningful progress except in the east. In fact, in the past week, Ukraine has retaken significant territory around Mykolaiv and Kherson in the southwest, around Irpin and Makariv to the west of Kyiv and Trostyanets to the east of Kyiv. With each passing day, the Ukrainian hand in the ongoing ceasefire negotiations becomes stronger rather than weaker.

In this context, the Russian announcement of a new phase of the war that will focus on the Donbas has two purposes. Firstly, it represents a pragmatic military strategy. The Donbas is the part of Ukraine where Russian forces stand the best chance of achieving major military successes they are attempting to concentrate sufficient forces to break the Ukrainian defence line along the Donets River and have gained important ground around Izyum in the past week. It makes sense to prioritise overstretched forces where they have the best chance of achieving tangible results, which will improve their bargaining position in ceasefire talks. Secondly, this is the start of an effort to moderate the expectations created by the completely unrealistic view of the war that the Russian government has fed its people.

Despite this, some in the Russian government seem to find it hard to accept these reduced ambitions and the reality that they imply. On March 27, the propagandist known as Putins mouthpiece, Dmitry Kiselyov, stated on Russian television that Russia will never cede Ukraine to anyone it has to be part of Russia, even against Ukraines own will. Furthermore, Russia continues to conduct missile strikes throughout Ukraine including in Lviv in the west, and is finding it difficult to disengage its forces around Kyiv, Kharkiv, Sumy and Kherson due to strong Ukrainian counterattacks. Therefore, while a new phase of the invasion has been announced, it remains to be seen if Russia can successfully focus on the Donbas as stated.

The views expressed in this article are the authors own and do not necessarily reflect Al Jazeeras editorial stance.

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Russia has effectively admitted defeat In Ukraine - Al Jazeera English

VILNIUS, Lithuania (AP) Russias tech workers are looking for safer and more secure professional pastures.

By one estimate, up to 70,000 computer specialists, spooked by a sudden frost in the business and political climate, have bolted the country since Russia invaded Ukraine five weeks ago. Many more are expected to follow.

For some countries, Russias loss is being seen as their potential gain and an opportunity to bring fresh expertise to their own high-tech industries.

Russian President Vladimir Putin has noticed the brain drain even in the throes of a war that, according to the U.N. refugee agency, has caused more than 4 million people to flee Ukraine and displaced millions more within the country.

This week, Putin reacted to the exodus of tech professionals by approving legislation to eliminate income taxes between now and 2024 for individuals who work for information technology companies.

Some people in the vast new pool of high-tech exiles say they are in no rush to return home. An elite crowd furnished with European Union visas has relocated to Poland or the Baltic nations of Latvia and Lithuania.

A larger contingent has fallen back on countries where Russians do not need visas: Armenia, Georgia and the former Soviet republics in Central Asia. In normal times, millions of less-skilled laborers emigrate from those economically shaky countries to comparatively more prosperous Russia.

Anastasia, a 24-year-old freelance computer systems analyst from the Siberian city of Novosibirsk, chose Kyrgyzstan, where her husband has family.

When we heard about the war on (Feb. 24), we thought it was probably time to leave, but that we might wait and see. On February 25, we bought our tickets and left, Anastasia said. There wasnt much thinking to do.

Like all the Russian workers contacted for this story, Anastasia asked to remain anonymous. Moscow was cracking down on dissent even before the invasion of Ukraine, and people living outside Russia still fear reprisals.

As long as I can remember, there has always been fear around expressing ones own views in Russia, Anastasia said, adding that the war and the background noise of patriotism made the environment even more forbidding. I left one day before they began searching and interrogating people at the border.

The scale of the apparent brain drain was laid bare last week by Sergei Plugotarenko, the head of the Russian Association for Electronic Communications, an industry lobbying group.

The first wave 50,000-70,000 people has already left, Plugotarenko told a parliamentary committee.

Only the high cost of flights out of the country prevented an even larger mass exit. Another 100,000 tech workers nevertheless might leave Russia in April, Plugotarenko predicted.

Konstantin Siniushin, a managing partner at Untitled Ventures, a tech-focused venture capital fund based in Latvia, said that Russian tech firms with international customers had no choice but to move since many foreign companies are hastily distancing themselves from anything Russia-related.

They had to leave the country so their business could survive, or, in the case of research and development workers, they were relocated by HQs, Siniushin wrote in emailed remarks.

Untitled Ventures is helping in the migration; the firm charted two flights to Armenia carrying 300 tech workers from Russia, Siniushin said.

Some nearby countries are eager to reap the dividends.

Russian talent is primed for poaching. A 2020 Global Skills Index report published by Coursera, a leading provider of open online courses, found that people from Russia scored highest for skill proficiency in technology and data science.

As soon as the war started in Ukraine, the Central Asian nation of Uzbekistan radically streamlined the process for obtaining work visas and residence permits for IT specialists.

Anton Filippov, a mobile app programmer from St. Petersburg, and the team of freelancers with whom he works made the move to Tashkent, the Uzbek capital, where he grew up, even before those incentives were made public.

On February 24, it was like we had woken up to this different terrible reality, Filippov said. Were all young, less than 27 years old, and so we were afraid we might be called up to take part in this war.

As in-demand tech workers explore their options, their diaspora resembles a roaming caravan. Some countries, like Uzbekistan, are picked as stepping stones because Russian citizens do not need visas for short-term stays. But young professionals like Filippov do not plan to necessarily stay where they first landed.

If the conditions they find differ from the ones they were promised, they will simply move on, he said.

In many cases, entire companies are looking to relocate to avoid the fallout from international sanctions. A senior diplomat from another Russian neighbor, Kazakhstan, made a naked appeal this week for fleeing foreign enterprises to come to his country.

Kazakhstan is eyeing high-tech investors with particular interest as the country tries to diversify its economy, which relies on oil exports. In 2017, the government set up a technology park in the capital, Nur-Sultan, and offered tax breaks, preferential loans, and grants to anybody prepared to set up shop there.

The uptake has been moderate so far, but the hope is that the Russian brain drain will give this initiative a major shot in the arm.

The accounts of Russian companies are being frozen, and their transactions do not go through. They are trying to keep customers, and one available opportunity is to go to Kazakhstan, said Arman Abdrasilov, chairman of Zerde Holding, an investment fund in Almaty, Kazakhstans business hub.

Not all countries are so eager, though.

Russian companies or startups cannot move to Lithuania, said Inga Simanonyte, an adviser to the Baltic nations Economy and Innovation Minister. We do not work with any Russian company with their possible relocation to Lithuania, and the ministry has suspended all applications for startup visas since February 24.

Security concerns and suspicion that Russians might spy or engage in cyber mischief abroad make some governments wary about welcoming the countrys economic refugees.

The IT sector in Russia is very closely connected to the security services. The problem is that without an extremely strong vetting process, we risk importing parts of the criminal system of Russia, Lithuanian political analyst Marius Laurinavicius told The Associated Press.

Siniushin, the managing partner at Untitled Ventures, is urging Western nations to throw open their doors so their employers can take advantage of the unusual hiring opportunity the war created.

The more talent that Europe or the United States can take away from Russia today, the more benefits these new innovators, whose potential will be fully realized abroad, will bring to other countries, he said.

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Follow APs coverage of the war in Ukraine at https://apnews.com/hub/russia-ukraine

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As Russia sees tech brain drain, other nations hope to gain - The Associated Press